Financial Information Services

If you have over the insured limits at a bank that fails, you run the risk of losing that money. Many depositors this year have been lucky. For most of the 29 bank failures this year, no depositors have lost money, even those with deposits over the insured limits. For those cases, the FDIC arranged for another bank to assume all deposits. However, there have been a few cases this year and many cases in previous years of depositors losing their uninsured deposits. One of this blog's readers described losing some his deposits that went over the insured limits (due to accumulated interest) at a bank that failed last year.

This WSJ article describes what has happened to one retiree who had her life savings of nearly $600,000 at Superior Bank in Illinois in 2001 when the FDIC seized the bank due to "alleged improper financial and accounting practices related to its subprime busines." Her uninsured deposits were frozen. Since then the retiree has been receiving payments from the FDIC. So far she has received all but $100,000 of her deposits. Unfortunately, as the article describes, those payments have stopped due to a lawsuit settlement with Beal Bank which "accused the FDIC of misleading it about the quality of a portfolio of Superior mortgages bought from the agency for $340 million."

So as you can see, it can be a very long time to get back all of your uninsured deposits. In the comment section of the article, one commenter asked why the retiree deserved to get back any of the uninsured deposits. Yes, the retiree may have made a mistake to have uninsured deposits, but it's not like she stole the money. It's her money that she likely earned by honest, hard work. However, even though she doesn't deserve to lose that money, it doesn't mean that tax payers owe her the money. The payments that the FDIC was making were not coming from tax payers but assets of the failed bank. Here's how the FDIC describes this process:

Customers with uninsured deposits receive the insured portion of their account as described above. They will wait longer to receive payment for some or all of their uninsured deposits. The amount of uninsured deposits they may receive, if any, is based on the sale of the failed bank's assets. Depending on the quality and value of these assets, it may take several years to sell the assets. As assets are sold, uninsured depositors receive periodic payment on their uninsured deposit claim.

• FDIC list of failed banks

		LEARN MORE
		•	FDIC Study of Bank Overdraft Programs
		•	When a Bank Fails - Facts for Depositors, Creditors, and Borrowers
		•	Symbol of Confidence for 75 Years
		•	Savings-Related Resources
		•	Certificates of Deposit: Tips for Savers
		•	Protecting Yourself from Overdraft and Bounced-Check Fees (www.federalreserve.gov)
		•	Go Direct - receive federal benefits safest, fastest, easiest way possible -- direct deposit (www.godirect.org)
		•	Correcting Bank Account Errors
		•	Check Clearing for the 21st Century (Check 21 Act)
		•	Search for Unclaimed Funds
		•	Safe Internet Banking

DEPOSIT INSURANCE
Learn how deposit insurance works and whether the FDIC insures your deposits

Frequently Asked Questions for Deposit Insurance
		Bank Find Search for your bank to find out if it is insured; find the locations of your bank's branches; find out if your bank has merged or been acquired; or review your bank's history.
		Are My Deposits Insured? Find out how FDIC deposit insurance works and estimate coverage on your deposits.
		Uninsured Investments Determine which investments are not insured by the FDIC.
		The Deposit Insurance Fund Learn about the FDIC's risk-based premium system and the deposit insurance reform legislation. This includes the FDIC's Assessment Rate Calculator.
		International Deposit Insurance Find out how the FDIC fosters communication and coordination among other countries' deposit insurance systems.